According to Harvard Business Review, an organization’s long-term success hinges on enterprise alignment — a value chain in which the organization’s purpose is aligned to its business strategy, organizational capability, resource architecture, and management systems. Among management systems, workforce management is perhaps one of the most critical, since every organization depends on the efficient management of its talent to accomplish its objectives. In this endeavor, cost and performance are both important aspects to consider.
Common Workforce Management Mistakes
Despite a company’s best efforts to achieve effective workforce management, we’ve observed several common mistakes that can have a detrimental impact on overall productivity and quality. Two examples we’ll focus on here are using a fixed team of experienced employees, and employing sufficient employees can result in a higher cost per unit (CPU) than necessary.
Two Common Workforce Management Issues — and Their Solutions
When we started working with Sony, the company was experiencing a high CPU in one facility due to employing an experienced team of long-term tenured employees whose salaries were above industry standards. The company did not have the flexibility to scale back during times of lower demand when a decreased output volume didn’t justify employing a full staff. While they had a great team in place, there was not a proper measurement system of productivity and efficiency leaving room for analysis and process optimization.
Working closely with the Sony team, we developed unit-per hour expectations for each department and right-sized the workforce based on projected volumes. Then we identified top performers, put a strategy in place to retain them, and turned over underperformers, replacing them with a more flexible workforce. In addition, we implemented a performance tool to measure productivity, as well as a database designed to provide visibility of the daily workload. We conducted time studies to develop standards, started tracking employees’ productivity — providing coaching when necessary — and tied incentives to exceeding production standards. Finally, we reconfigured the warehouse so top moving models would travel the smallest distance to the dock.
As a result of these improvements, Sony realized a savings of $2 million in labor costs at this facility in the first year alone. Over the first three years, the savings totaled $5 million.
Another client experienced the opposite issue. The company employed a relatively small full-time workforce to keep labor costs low. However, in times of peak demand, it was difficult to staff up, which resulted in significant amounts of overtime and increased labor costs. After performing an in-depth analysis of the company’s operations, we determined that it could decrease CPU by expanding its headcount.
Together with the management team, we managed a cultural change that began with gaining the support of the key stakeholder and subsequently implementing communications from the top down. We also actively worked with the team leaders, both to get their opinions regarding process improvements and to secure buy-in. We used the CPU model to drive changes, performing A/B testing with ideas, and implemented the ones that resulted in the best prices.
Thanks to improved efficiencies and an expanded workforce, the facility was able to increase production by 10,000 units per day. CPU initially decreased from 1.41 to 0.47, and currently, it is set to drop even further to 0.41.
The Value of an Expert Workforce Consulting and Solutions Firm
Common workforce management issues like the ones mentioned above can prevent an organization from achieving enterprise alignment and attaining its objectives. Your business could be using inefficient or ineffective processes and systems, simply because they’re the established way to do things. You’ll need to address these types of issues before you can reach your operational goals.
It’s important to understand that since every organization is unique, there’s no one-size-fits-all solution. For this reason, it can be advisable to partner with a workforce consulting and solutions firm that possesses the expertise and experience to design a customized solution for your unique situation. This will improve your workforce management processes while at the same time, freeing you up to concentrate on your core business.
At nGROUP, we’ve partnered with some of the world’s largest electronics and automotive manufacturers, as well as leading fresh fruit producers, to improve their efficiency and reduce their CPU. Our in-depth analyses of these companies’ operations revealed that workforce changes that could positively affect productivity, labor costs, efficiencies, and revenues had not been implemented. Reasons for this depended on the company and the situation, but oftentimes included factors such as a lack of visibility, fear of change, and a shortage of in-house knowledge.